On August 11, 2023, the CCI imposed a penalty of INR 10,00,000 (approx. US$ 12,000) on Cummins Inc. (‘Cummins’) in relation to the acquisition of sole control of Meritor inc. (‘Meritor’) by Cummins. ^[1]

Parties

Cummins is a global supplier of diesel, natural gas, electric and hybrid power trains and power train-related components. Meritor is a global supplier of axles, brakes, and other modules and components to original equipment manufacturers and the aftermarket for the commercial vehicle, transportation, and industrial sectors.

Transaction

Cummins acquired sole control over Meritor, where Rose NewCo Inc., a company newly incorporated by Cummins, merged with and into Meritor; and Meritor survived as a directly wholly owned subsidiary of Cummins (‘Transaction’). The Transaction was consummated on August 3, 2022, after which the notice of the Transaction was given to the CCI – in November 2022.

Proceedings under Section 43A^[2]

Show Cause Notice: On May 18, 2023, the CCI issued a show cause notice to Cummins asking why it should not be held to be in contravention of Section 43A of the Competition Act for consummating the Transaction without notifying the CCI. The CCI observed that the Transaction was not eligible for the benefit of DME as the assets and turnover of Meritor in India under the Transaction were higher than the DME threshold. Accordingly, a notice in terms of Section 6(2) of the Competition Act was required to be given by Cummins before consummation of the transaction and the parties were required to observe the standstill obligation in terms of Section 6(2A) of the Competition Act.

Submissions by Cummins: Cummins submitted that at the time of assessment of notification requirement, Cummins and Meritor were separate and independent companies and it did not have access to confidential financial information of Meritor. The securities regulation of the U.S. also imposed further restrictions on sharing such information. Cummins argued that the error which led to the delayed filing was a bona fide mistake that occurred at Meritor’s behest. Lastly, it submitted that as soon as it was apprised of the error (i.e., on receiving Meritor’s financial information, when it discovered that Meritor’s Indian turnover values exceeded DME threshold), it voluntarily, promptly, and proactively approached the CCI to notify the transaction.

CCI’s Findings: The CCI noted that the Transaction qualifies as a combination in terms of Section 5 of the Competition Act and does not benefit from DME. The CCI held that Section 43A is applicable irrespective of the failure to notify being intentional or inadvertent. Hence, the CCI dismissed the arguments of Cummins and held that Cummins would not be absolved from its duty (of notifying the Transaction under Section 6(2) of the Competition Act and observe the standstill requirement under Section 6(2A) of the Competition Act) merely on the ground of an error in assessing the applicability of DME.

The CCI concluded that Cummins has violated the provisions of Sections 6(2) and 6(2A) of the Competition Act. It was held liable for penalty of INR 10,00,000 (approx. US$ 12,000) under Section 43A of the Competition Act, accounting for mitigating factors such as cooperation by Cummins during the CCI proceedings.

^[1]       Proceedings against Cummins Inc., Combination Registration No. C-2022/11/981.

^[2]       Section 43A provides for the imposition of penalty by the CCI for non-furnishing of information on combinations. It provides that if any person or enterprise who fails to give notice to the CCI under sub-section (2) of section 6, the CCI shall impose on such person or enterprise a penalty which may extend to one percent, of the total turnover or the assets, whichever is higher, of such a combination.